Money News
Latest housing market data from property website, Rightmove, shows house prices falling in London for the first time since August 2006. Prices nationally meanwhile rose by 0.6% (£1,473) in August - the fourth consecutive month of modest rises, giving a year on year increase of 12.8%.
The property website notes that should current trends continue i.e. with price rises of less than 1% per month, it would be consistent with the annual rate of house price inflation becoming more closely aligned with annual wage inflation, currently running at around 3% to 4%.
Miles Shipside, Commercial Director of Rightmove notes that current market conditions finally pave the way for a return to a sustainable market without the need for further interest rate rises, though many buyers will still face affordability problems.
Shipside adds that a further early indicator of the future direction of the property market is the first monthly fall in London's average asking prices since August 2006. The fall was slight at just 0.1% (£462), but is put into context by the fact that London prices have risen by an average of 2% a month for the last 12 months.
The strength of the London market has been one of the main driving forces behind the rise in national average prices. London's annual rate of increase is currently 23.4%. And nearly double the national rate of increase.
Shipside further comments: "This fall is the first we have seen for some time and is an early warning signal that even the buoyant London economy is susceptible to market forces.
"The capital and international status of London means that prices are likely to be more resilient in the longer term, unless the current turmoil in the financial markets undermines employment and wealth creation."
Asking prices appeared to have peaked in July 2004, but the London mini boom helped drive average national prices up by a further 23%, an average of £45,262, over the next three years.
Another indication of the slowing market is the average time on the market spent by a typical property having jumped from 80 to 85 days this month.
"Whilst a slower market is to be expected in the summer holiday season, it shows that the balance of power has switched from seller to buyer in most parts of the country. This could swing even further in buyers' favour if the current credit tightening reduces lenders' ability to provide mortgages at the rates achieved in recent months.
"This may lead to slight increases in mortgage rates even without another rate rise by the Bank of England," says Shipside.
20 August 2007 © Moneyextra.com
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